Get your popcorn ready because there is nothing more exciting than the intersection of sports and tax! As a former Division II athlete, the current state of college sports and Name, Image, and Likeness (NIL) deals is fascinating. Student-athletes typically focus on maintaining good grades, practicing hard, and playing to the best of their abilities, but the Internal Revenue Code (Code) is unlike any playbook they’ve ever seen. Based on a recent hearing, it appears that Congress is aware of the pressures and challenges facing student-athletes both on the field and in complying with the Code.
Brief Overview
On June 30, 2026, the House Ways and Means Committee (Committee) convened a public hearing on The Growing Business of Sports: Reviewing Federal Tax Policy in the Multibillion-Dollar Industry. During the hearing, the Committee focused on two issues: (1) tax compliance burdens for student-athletes earning income NIL deals, and (2) tax-exempt financing for sports stadiums. If you think navigating a prevent defense in the final two minutes is stressful, try navigating the Code provisions governing a $2.5 trillion global sports industry.
In advance of the hearing, the Joint Committee on Taxation (JCT) prepared a detailed report, Present Law Relating to Selected Sports Industry Tax Issues (JCX-19-26, June 24, 2026) explaining the current state of sports industry tax issues.
The JCT report did not recommend policy changes. Rather, it provided the current version of the Code as it relates to the sports industry so that members of Congress, stakeholders, and the public can assess whether existing law should be changed considering the explosive commercialization of American sports. Think of it as the scouting report before the big game. While the JCT report outlined the current version of the Code, the Committee hearing showed that Congress is seriously considering changes to certain favorable tax treatments for the sports industry.
This post summarizes the JCT report, the Committee’s hearing, and active (and stalled) tax legislation affecting the sports industry. Student-athletes, athletic departments, athletic directors, stadium owners, and advisors should be aware of the issues addressed in the JCT report and the hearing because proactive planning may be key to avoiding (IRS) penalties.
II. Overview of Selected Sports Industry Tax Issues
Similar to winning a football game, changing the Code is done one inch at a time. Before knowing where Congress may be headed, we need to understand the current state of tax laws affecting the sports industry. As the JCT summarized, here is what is at stake:
Tax-Exempt Financing of Sports Facilities. Remember the Titans? Well, remember section 141, because tax-exempt bonds remain a primary tool for financing professional sports stadiums. In 1986, Congress eliminated express tax-exempt financing authority for sports facilities. Nevertheless, sports stadiums continue to qualify for tax-exempt financing through structures which only violate one of the two tests under section 141: (1) private business use test or (2) private security/payment test.
For bond proceeds used to build a professional sports stadium, the private business use test is almost always violated because a private business (i.e., the sports team) uses more than 10% of the stadium. But bonds can still qualify as tax-exempt if the debt service for the bonds is primarily paid with sources other than stadium revenues or other private payments. For example, the bonds should not violate the private security/payment test if the local government uses sales tax or property tax revenues to pay the principal and interest on the bonds.
Tax Treatment of NIL Collectives. Many NIL collectives sought or obtained tax-exempt status under Code section 501(c)(3), which requires entities to be organized and operated exclusively for exempt purposes and prohibits private inurement. In 2023, the IRS effectively put an end to tax-exempt collectives in a legal memorandum which found that those entities often operate for a substantial nonexempt purpose—namely, serving the private interests of student-athletes.
The memorandum did not revoke the exempt status of any NIL collective, and did not preclude collectives from potentially qualifying as exempt in the future. But the IRS confirmed its position that collective should not qualify as tax-exempt in private letter rulings (PLRs) issued in 2024 and 2025. Those PLRs concluded that certain organizations formed to facilitate NIL sponsorship deals for student-athletes did not qualify as tax-exempt under section 501(c)(3). But Congress has not yet changed the Code to reflect that NIL collectives are not tax-exempt. Thus, it remains possible for an NIL collective to apply for, and obtain, exempt status.
Tax Treatment of Colleges, Universities, and Leagues. Generally, private and public colleges and universities are tax-exempt under section 501(c)(3). As a result, an athletic department that is part of a tax-exempt college or university derives their exempt status from the college/university. The IRS has historically treated athletic programs conducted for the physical development and betterment of students as integral to the educational activities of colleges or universities.
Most tax-exempt organizations are subject to unrelated business income tax (UBIT) on income derived from a trade or business not substantially related to exempt functions. However, college athletic activities have typically been treated as substantially related to a school’s educational purposes such that a school’s college sports revenue is not subject to UBIT. Likewise, the IRS generally does not tax revenue from the sale of broadcasting rights by athletic conferences.
Other sports industry tax issues.The JCT Report also summarized three additional issues: (1) the deductibility of acquired sports franchises and related intangibles such as player contracts and goodwill, (2) limitations on the deductibility of professional athlete salaries, and (3) tax-exempt sports leagues. But the Committee hearing did not focus on those issues.
III. Hearing Highlights
Stadium Subsidies: Who Really Wins?
Chairman Smith set the tone early, criticizing tax-exempt municipal bonds used for stadium construction, renovation, and relocation. He noted that 43 of 57 new stadiums built over the past 20 years used tax-exempt bonds at a cost of $4.3 billion to federal taxpayers.
For its part, the National Association of Bond Lawyers submitted a statement opposing blunt restrictions on tax-exempt financings, arguing they could erode local decision-making authority and sweep in broader community, university, high school, recreational, and park facilities if defined too broadly.
Friday Night Liabilities: NIL and the Unprepared Athlete
One issue addressed during the hearing, but not in the JCT Report, was tax compliance burdens on athletes earning income from NIL deals. Although tax and financial advisors may be aware that NIL income is taxed like any other income, testimony during the hearing suggests that student-athletes lack a basic understanding of how to prepare a Form 1040 let alone how to calculate and report quarterly estimated taxes.
Perhaps the most compelling testimony came from Sam Acho and Thad Madden regarding the tax crisis facing college athletes earning NIL income. Mr. Acho, a former NFL player and advocate, described athletes with $750,000 NIL deals who did not understand estimated taxes—including one athlete left with just over $6,000 in his account and a $320,000 tax bill. Acho testified that the Code was not written for a 17-year-old college football player coming into sudden wealth and emphasized that players need advocates, not fans. He proposed mandatory withholding into a retirement-type account and mandatory financial education.
Mr. Madden, a former IRS revenue officer, testified that college athletes are generally treated as self-employed independent contractors with no withholding. That means they must independently handle income tax, self-employment tax, quarterly estimated payments, scholarship income issues, business deductions, and multi-state tax questions. In response to a member’s question regarding FICA taxes (i.e., Social Security and Medicare taxes), Mr. Madden confirmed that student-athletes are responsible for the full 15.3% self-employment tax, with nothing withheld up front. These are Friday Night Liabilities—unexpected tax bills that blindside young athletes the way a safety blitz blindsides a freshman quarterback.
Taken together, the testimony and member questions show that Congress is aware that student-athletes face tax compliance burdens that they may not be prepared to handle. Noticing a safety creeping up on 3rd and 2, calling an audible, and throwing a deep ball for a touchdown is one thing. Navigating the complexities of the Code is another.
Hurry-Up Offense: New Legislation Suggests Action (Or Not)
Shortly after the Committee hearing, the Helping Undergraduate Students Thrive with Long-Term Earnings (HUSTLE) Act was introduced in the House. That bill would create tax-advantaged accounts for student-athletes to invest NIL earnings tax free. The HUSTLE Act would allow amateur student-athletes at a “participating institution of higher education” to contribute NIL earnings up to the annual gift tax exclusion amount ($19,000 in 2026) into an investment account. Distributions from the account would generally be taxed as capital gains after graduation, but earlier distributions would be taxed as ordinary income.
Although it is encouraging to see Congress taking some action to potentially address student-athletes’ tax issues, it currently appears unlikely that Congress will get the HUSTLE Act across the goal line. Just last year, the Senate introduced a companion bill, but that legislation has not moved forward since it was introduced.
Also last year, Congress introduced the Student Compensation and Opportunity through Rights and Endorsements (SCORE) Act which addressed one of Mr. Acho’s recommendations: financial education for student-athletes. The SCORE Act would require colleges and universities to provide academic support and career counseling services to student-athletes, including life skills programs with respect to financial literacy, mental health, and access to third-party legal and tax services. Like the Senate’s version of the HUSTLE Act, Congress has not taken up the SCORE Act in 2026.
Notably, neither the HUSTLE Act nor the SCORE Act include provisions mandating withholding on a student-athlete’s income from NIL deals.
Another bill that appears to have stalled is the No Tax Subsidies for Stadiums Act which would eliminate tax-exempt financing for professional sports stadiums. Congress has not taken any action on that bill since it was introduced in 2025.
Based on the lack of activity, it is unclear whether Congress will push the HUSTLE Act, SCORE Act, or the No Tax Subsidies for Stadiums Act over the goal line in 2026.
IV. Conclusion
The hearing was a clear signal that Congress is paying attention to sports-industry tax issues—though it is uncertain whether legislation will become law in 2026. What emerged was bipartisan concern across several fronts, which practitioners and stakeholders should monitor closely.
For athletes, team owners, athletic directors and departments, and advisors operating in this space, the takeaway is clear: the rules of the game may be changing. Whether Congress ultimately narrows tax-exempt bond eligibility, imposes withholding on NIL income, or allows tax-free contributions to NIL investment accounts, proactive planning and compliance review are essential. As Coach Boone reminded the Titans, this is no democracy—and in the tax world, the Code is the law. The smart play is to prepare now, before the whistle blows.
Questions about NIL income tax compliance or tax-exempt stadium financing? Contact Adam R. Young— because when it comes to tax literacy and compliance, the best time to act is now.